Finance teams have an opportunity to improve accounts receivable (AR), accounts payable (AP), and related functions simply by adding automation. Modern accounting software makes it easy to do so. Whilst there are many finance areas that could benefit from technology, invoice automation is a low-hanging fruit that many finance teams would be wise to grab.
From automatically creating invoices to automatically integrating with other systems like payroll management software (such as when paying a contractor’s invoice), invoice automation can quickly improve finance processes.
As we’ll explore in this article, manual invoice management can be a bigger problem than you might realise, whilst invoice automation offers several benefits. And finding the right accounting platform or bookkeeping tool to achieve invoice automation can be easier than you think.
Problems with manual invoicing
When companies lack invoice automation, they often dedicate unnecessary resources to creating, processing, and managing invoices. For example, a survey of business leaders in the UK and US by BlueSnap (a payments company) finds that 71% of senior decision-makers say up to 15 people get involved with each invoice.
Having too many hands on deck can slow down processing and prevent staff from focusing on more valuable activities. Manual processing can also cause issues related to customer experience. Invoice errors can cost customers their own time to fix, and if you overcharge a customer due to a manual typing error on an invoice, that can sour the relationship.
“More than 30% of our survey respondents who agree they should be investing in AR automation indicate that they expect it would lead to an increase in customer satisfaction,” notes BlueSnap.
Benefits of invoice automation
As the problems with manual invoice management indicate, automating invoice management means more than just keeping up with tech trends. Instead, it can improve your finance function. Some of the top benefits of invoice automation include:
Reduce invoice errors
Manual processes can lead to invoice errors, like typing in the wrong price, sending out the wrong invoice, duplicating an invoice, and more. That not only can be inconvenient for yourself and customers, but it can cost money too.
An invoice mistake like undercharging a client can mean missed revenue. Or, if manual processes cause issues like sending the wrong check to the wrong vendor, that can lead to late fees or cause vendors to change their payment terms with you. With invoice automation, however, you can cut down on these costly errors.
“Companies that properly automate their AP processes can expect to reduce their costs and errors by 70– 85% during primary invoice processing tasks,” finds a survey by the Shared Services Outsourcing Network (a community for shared services and outsourcing professionals), commissioned by Kofax (an automation software company).
Save time on invoicing
Another advantage of invoice automation is that it can save time. Especially when part of a comprehensive accounting platform, you can cut out manual steps that can be slow. For example, some finance automation software tools can easily match purchase orders with invoices, leverage invoice templates, send automatic approval requests, and more.
Around two-thirds of finance teams globally say they spend over five days per month on invoice management, according to a survey by the Association of Certified Accounts Payable Professionals, commissioned by Webexpenses (an expense management software company). And only 5% of surveyed companies have fully automated AP.
So, with more automation, finance teams can potentially shorten the number of days spent on invoice management. By doing so, they can focus on more strategic finance activities like making cost predictions or anything else they’d like to spend more time on.
Improve cash flow
Being able to quickly and accurately manage invoices through automation can also help businesses improve cash flow. In fact, a study by Bill.com (a payments company) and CFO Research (the research arm of CFO Publishing) finds that cash flow management is the top reason finance leaders invest in AP and AR automation.
Why? For one, the more days it takes to send out an invoice, the more days you’ll have to wait to get paid. But with automation, you can take steps like instantly turning a proposal into a bill that then gets sent out to the customer.
And if the invoice is easy to manage on your customer’s end, like if you send out a digital invoice that easily enables multiple payment options online, you might get paid faster. Then, having to deal with fewer physical checks, for example, can speed up the time it takes for that payment to ultimately end up in your account.
Likewise, automating invoices for payments that you owe to vendors can help you get a more accurate view of your cash flow. A delayed invoice might cause you to mistakenly assume you have more cash available than you really do.
How to pick the right accounting solution for your company
Many types of accounting solutions can help automate invoice management, but with so many options, how do you know what to choose? Part of the answer depends on the size and complexity of your finance department.
For example, many small-to-midsize businesses find success using cloud-based accounting platforms that make it easy to automate areas like sending invoice reminders and tracking payments. Many of these platforms have similar features, so if you find that you don’t have a preference in that regard, you might want to pay attention to areas like the user experience and fees (both monthly platform fees and additional costs, such as for credit card processing).
If you have more robust finance needs, then you might want to look into using an enterprise resource planning (ERP) system that goes beyond invoice management and general bookkeeping. These tools can give you more of an enterprise-wide view of your finances, while also providing insights into related areas like inventory management. A large, complex business also may want to explore implementing custom accounting software, whereas a small business can often find what they need with an existing online tool.
Since there are so many ways to go when choosing the right accounting platform for invoice management and overall finance automation, you may want to test several tools or consult with an expert.
If you’re ready to explore your options for adding invoice automation, YourShortlist can help. We’re a technology consultancy using procurement best practice and data insights to save companies time and money. Our goal is to make business technology procurement simple, transparent, and cost-effective. We won’t charge you anything, and we won’t share any of your project details without your explicit approval.